In the long run it really doesn’t matter what the market’s doing. Unless, of course, you own an index fund, then it matters a lot. However, if you own individual companies then only their business results truly matter. The evidence is overwhelming. In the long run earnings determine market price.
There is also the issue of valuation that will contribute to return. Given any level of earnings, the price or value you pay to buy those earnings are critical to success. However, it’s still the rate of change of earnings growth or shrinkage that matters most.
Today’s video reviews several examples that provide evidence of the importance of earnings.
Best when viewed in full youtube screen.
Disclosure: Author Manages Portfolios Long CTSH
The key to long-term investing success in common stocks is to forecast earnings reasonably accurately. You don’t need to be perfect, just essentially correct. Also, it’s much more practical to forecast business results than it is the stock market.